Operational problems cut AA's Sept traffic

[WorldTraveler]

AA's traffic results show that AA mainline domestic RPMs were off 7% on 5.5% less capacity, offset by AA's performance on its int'l network where AA appeared to be able to retain customers better. AMR's consolidated RPM's were off about 3% on 3.4% less capacity.

AA's RASM was up about 4% but they note that if capacity had remained as scheduled, RASM would have been up about 1/2 of one percent, in line with some of their other network peers.

AA's consolidated effective fuel cost was $3.31, 20 cents higher than other carriers that have reported monthly fuel costs.

AA's cargo traffic was off more than 8%.

http://finance.yahoo...-131500557.html

 

[FWAAA]

AA's RASM was up about 4% but they note that if capacity had remained as scheduled, RASM would have been up about 1/2 of one percent, in line with some of their other network peers.

I'm not certain that you're interpreting AA's comment correctly. When AA said that consolidated RASM would have been 0.4% "higher" if not for the operational difficulties, it appears that absent those difficulties, consolidated RASM would have been up 4.4% compared to Sept 2011.

 

[WorldTraveler]

it's hard to believe that AA would have pulled off a 4.4% RASM improvement when no other peer cracked 1% RASM improvement and a number had negative RASM growth and AA hasn't exceeded any of its peers by more than 1% so far this year.

I don't remember the exact dates but the excise tax was dropped for a short period last year which is what is hurting industry RASM comparisons this year.

Of course we will never know what MIGHT have been.....

history will show that AA's RASM improvement was in line with other carriers even despite AA's significant operational difficulties, which in itself is not a bad accomplishment.

Obviously w/ RASM up a half percent and capacity down several percent, AA's revenues did shrink.... but so did other carriers too.

 

[1AA]

It is their own doing. They run this company.

 

[eolesen]

it's hard to believe that AA would have pulled off a 4.4% RASM improvement when no other peer cracked 1% RASM improvement and a number had negative RASM growth and AA hasn't exceeded any of its peers by more than 1% so far this year.

Not entirely hard to believe if AA had that much worse performance in 2011... it was the month prior to their filing.

 

[WorldTraveler]

This report was for Sept 2012 w/ a year over year comparison to Sept. 2011. AA filed for Bk at the end of November 2011 if that is the "filing" to which you refer.

 

[FWAAA]

it's hard to believe that AA would have pulled off a 4.4% RASM improvement when no other peer cracked 1% RASM improvement and a number had negative RASM growth and AA hasn't exceeded any of its peers by more than 1% so far this year.

Given AA's relatively poor PRASM numbers for most of 2011 (and parts of 2010) as AA lagged the industry in PRASM growth, it doesn't seem to me to be all that difficult to believe as AA's new management (Horton instead of Arpey) has outpaced much of the industry so far this year (except DL of course). Could be that all AA is doing is catching up with its peers.

What would be more difficult to believe is that absent the schedule difficulties, PRASM growth would have been nearly flat (0.4% increase year over year). Believing that requires a suspension of critical thinking that I'm unwilling to do. Much easier for me to believe that the operational problems brought the PRASM growth down from 4.4% to 4.0% year over year.

I don't remember the exact dates but the excise tax was dropped for a short period last year which is what is hurting industry RASM comparisons this year.

The FAA was shut down for a couple of weeks late July and early August last year - dunno how much that affected September 2011.

Of course the operational problems hurt AA's revenues - but I don't think those difficulties caused PRASM growth to hit 4.0% when PRASM growth would have been just 0.4% without those problems. That makes no sense.

Ted Reed, Reuters and AP appear agree with me:

http://www.thestreet.com/story/11730548/1/amr-unit-revenue-leads-industry-thanks-to-international.html?puc=yahoo&cm_ven=YAHOO

http://www.reuters.com/article/2012/10/08/americanair-traffic-idUSL1E8L86B820121008?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43

http://finance.yahoo.com/news/american-airlines-key-revenue-number-152641223.html

 

[eolesen]

This report was for Sept 2012 w/ a year over year comparison to Sept. 2011. AA filed for Bk at the end of November 2011 if that is the "filing" to which you refer.

Sorry, you're right. It's two months and change before the bankruptcy filing...

But the point still stands -- if AA really had a revenue problem as you've stated repeatedly, then they'd still be likely to show a higher rate of improvement if the others were flat.

 

[WorldTraveler]

Yes, AA is beginning to fix its revenue problem that I spoke about for many years... including cutting poor-performing routes.
Given that no other carrier has reported a RASM increase for Sept. that exceeded 1/2%, yes, it does make sense to believe that AA was in the same ballpark. It is only the aggressive cuts that AA made to its schedule, planned or forced, that helped push its RASM so much higher, even w/ the more aggressive approach to cancelling poor performing service.

WN's RASM growth for Sept. was negative... UA's probably was as well.

AA's Atlantic capacity was off a fairly significant 5%... not sure how much of that was operationally related since AA did have some TATL cancellations in Sept but capacity cuts are exactly what other carriers have used to boost RASM and what AA did not do much before BK.

AA's Pacific network is also maturing... I don't think - correct me if I am wrong - that AA has added any new Pacific flights in over a year so they are beginning to grow into their capacity. That is a GOOD thing. Absent their support for DL's request to move the HND flight w/ a request to do the same for AA if granted to DL, AA's Pacific network is probably generating solid returns.

Once again, though, it is the Latin network where AA continues to be able to add and fill capacity. Latin America fares remain above average compared to other parts of the world for comparable stage lengths so it makes sense for AA to grow where it can - and as long as AA has an advantage in that many Latin markets are still limited access.

AA's total revenue had to have been slightly better than the year before given that RASM was slightly ahead of capacity cuts but AA paid 20 cents more per gallon for fuel than at least one other competitor which means that whatever slight revenue advantage they had was not enough to offset fuel costs which were at least 5% higher. Also, AA's cargo traffic was down enough that it had to create a fairly significant revenue shortfall.

We also don't know how AA's advance bookings look compared to other carriers... much of the bad press about AA's operational problems came later in the month of Sept and into Oct. The operation appears to be recovering again but at the minimum there will be an impact to AA's domestic system that will take several months to recover from based on the decrease in their domestic traffic.

 

[WorldTraveler]

UA has now filed their monthly traffic report and they gave up a fair amount of domestic traffic on a smaller capacity reduction while also paying about 20 cents per gallon more for fuel than AA and having RASM drop 2.5-3.5%.

Hawaiian just revised its quarterly revenue guidance down as well.

Sept. was a tough month for the industry as a whole. Sept. 2012 had 5 Saturdays while Oct 2012 has 5 Mondays for a much stronger business travel environment. From a revenue perspective, the challenge will be to see if AA recovers its domestic traffic in the months ahead.